Vendor’s Mistake Results in Inadvertent Production, Court finds No Waiver

Heriot v. Byrne, 2009 WL 742769 (N.D. Ill. Mar. 20, 2009)

In this declaratory judgment action, the parties sought to settle the issue of copyright ownership over a made-for-television movie called The Secret.  In the course of discovery, due to a mistake by their “document vendor,” plaintiffs inadvertently produced privileged information.  Upon discovery of the inadvertent production, plaintiffs immediately sought to claw back the privileged material.  Defendants resisted, arguing that privilege was waived.  Undertaking an extensive analysis of recently passed FRE 502 and the previously existing tests to determine waiver, the court ruled in favor of plaintiffs and ordered any remaining copies of plaintiffs’ privileged documents in defendants’ possession returned or destroyed.

Upon receipt of defendants’ discovery requests, plaintiffs hired a document vendor and developed a multi-step process by which they would produce responsive materials.  First, the vendors created a database of the documents provided to it from plaintiffs (“Master Database”).  Second, paralegals and other non-lawyers conducted an initial review in the Master Database and assigned the documents general discovery codes, e.g., “immigration.”  Third, plaintiffs searched for responsive documents in the Master Database and then coded them for inclusion in the Production Database.  Additionally, plaintiffs assigned protective order designations, either “confidential” or “highly confidential.”

Several months into the litigation, plaintiffs’ document vendor made a processing mistake which resulted in the production of privileged materials.  Nearly two months later, while preparing for depositions, plaintiffs learned of the inadvertent production.  The next day, plaintiffs sent defendants a letter in which they identified the documents (the “Sequestered Documents”) and requested their destruction.  Thereafter, defendants filed a motion to prevent plaintiffs from clawing back the Sequestered Documents.

The parties disagreed about the proper test to determine waiver.  Defendants argued in favor of the Judson test, taken from case law pre-dating the passage of FRE 502.  Plaintiffs argued in favor of applying recently enacted FRE 502.  Calling the effect of the passage of FRE 502 “an issue of first impression,” the court analyzed the steps of both tests and adopted a combination of the two:

This Court therefore adopts the following test. First, a court determines whether the disclosed material is privileged.  If it is not, the inquiry ends. If the material is privileged, the court applies FRE 502(b).  If the court concludes that disclosing party satisfied all of the elements in FRE 502(b), the privilege is not waived.  If, however, the disclosing party fails to satisfy any of the FRE 502 elements, the privilege is waived.  In applying FRE 502(b), the court is free to consider any or all of the five Judson factors, provided they are relevant, to evaluate whether each element of FRE 502(b) has been satisfied.  This Court applies and explains the details of this test in the following sections.

Determining that nearly all of the documents were privileged the court dismissed defendants’ arguments regarding the crime fraud exception, and turned to the question of the inadvertence of the production, pursuant to FRE 502.

Addressing each of FRE 502(b)’s three requirements separately, the court first took up the issue of the inadvertence of the production and noted that “this Court has…look[ed] to factors such as the total number of documents reviewed, the procedures used to review the documents before they were produced, and the action of producing party after discovering the documents had been produced.”  Additionally, the court considered “[t]he extent of the disclosure” and “the scope of discovery,” explaining that “[t]hese two factors work on a sliding scale:  the broader the scope of discovery, the more extensive a party’s disclosure of confidential materials may be without waiving the privilege, and vice versa.”

Defendants’ primary argument against inadvertence was that plaintiffs’ counsel was “asleep at the switch” and “should have examined the materials after turning them over to the Vendor.”  Defendants also placed great weight on the amount of material disclosed.

While the court agreed that the disclosure was “not insignificant,” it determined that other, more relevant factors outweighed that consideration.  Some of those factors included:  the speed of plaintiffs’ response, the extensive multi-phase review procedures, and the fact that the production of the Sequestered Documents was the fault of the vendor.  Thus, the court determined, the production was inadvertent.

The second element of FRE 502 requires the producing party to take reasonable steps to prevent disclosure.  Looking again to the guidance of the Advisory Committee Notes as well as to case law, the court determined that “the multi-step process Plaintiffs used to produce the Sequestered Documents…entailed reasonable precautions to prevent disclosure.”  In so deciding, the court again noted the vendor’s responsibility for the mistaken production.

Finally, FRE 502 requires the producing party to take prompt steps to rectify the inadvertent disclosure.  Once again relying on case law, the court determined that plaintiffs had taken sufficiently prompt steps to rectify the disclosure in light of counsel’s letter asserting privilege, identifying the documents at issue, and requesting defendants to destroy the information, which was sent less than 24 hours following discovery of the inadvertent disclosure.

Having addressed all three elements of FRE 502, the court determined that plaintiffs had not waived privilege as to the Sequestered Documents and defendants were ordered to destroy or return all remaining copies in their possession.

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